tag:blogger.com,1999:blog-6616959642391988608.post2624980867714252714..comments2015-08-02T05:02:03.464-07:00Comments on Calafia Beach Pundit: Implied volatility updateScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-6616959642391988608.post-73523042882236618562010-01-24T07:21:29.845-08:002010-01-24T07:21:29.845-08:00I am not sure I understand your logic on this one....I am not sure I understand your logic on this one.....from this perspective it seems credit creation drives demand.<br /><br />In Florida, homeless people were qualifying to purchase homes.....if the credit was not avavilable, homes would not have been purchased. The same can be said for automobiles, travel, and construction.<br /><br />It is often said that builders will build to the limit of credit available......it is simply human nature for many.<br /><br />Since Credit has been curtailed....new home construction is down 80%, auto sales down about 50%, commercial construction coming to a grinding halt, and travel down about 25%.<br /><br />These are depressionary numbers.....and seemingly, the only thing keeping our economy going right now might be Obama borrowing a few trillion per year to help offset the decline in credit extension to the private economy.<br /><br />What if we transferred all of America&#39;s savings through credit expansion to borrowers who consumed it and have no means or capacity to pay the loans back(M2 is only a fraction of total debt)......how do you see the economy recovering without massive inflation coming out of Washington?alstryhttp://www.blogger.com/profile/16025398896639165994noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-20571247817867130462010-01-23T17:55:50.358-08:002010-01-23T17:55:50.358-08:00Since credit expansion can&#39;t create new demand...Since credit expansion can&#39;t create new demand, the expansion of credit adds to GDP only marginally, by distributing demand to areas of the economy that need it but might not otherwise get it. Credit is one way that savers are connected to spenders; an expansion of credit more efficiently connects savers to spenders.<br /><br />Ergo, the big contraction in credit and all the credit defaults have not had a significant effect on GDP. Creating credit did not add to demand, and destroying credit does not subtract from demand. The credit contraction has had the effect of throwing sand in the gears of commerce, slowing things down somewhat. I&#39;m going to guess that GDP is no more $300-400 billion less, because of the credit contraction, than it otherwise might be if the economy were at full employment. Compare that to the trillions in credit writedowns and defaults.Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-8057846756058484412010-01-23T17:10:21.895-08:002010-01-23T17:10:21.895-08:00Scott,
What percentage of GDP growth over the pas...Scott,<br /><br />What percentage of GDP growth over the past decade was directly attributable to the expansion of credit?<br /><br />How much do you think GDP will contract as credit is curtailed or defaults.....?<br /><br />Thanks.alstryhttp://www.blogger.com/profile/16025398896639165994noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-70856240474848700992010-01-23T15:14:45.736-08:002010-01-23T15:14:45.736-08:00There is already a serious risk that he won&#39;t ...There is already a serious risk that he won&#39;t be confirmed, and this could be contributing to selling pressure this past week. In the end, though, what&#39;s important is who replaces him. Bernanke hasn&#39;t done a very good job, but the list of those who could do better is pretty short. John Taylor is the first one to come to mind. Donald Kohn seems to be on everyone&#39;s short list, but I don&#39;t think he would be preceived as necessarily worse than Bernanke. Chris Dodd, however, would be disastrous, but I have real trouble believing that he could be confirmed. <br /><br />There are real risks involved here, and I think the market is already very concerned. If the market is efficient and smart, and I believe it is, it won&#39;t be very disappointed if Bernanke leaves. What will be more important is who replaces him. <br /><br />Remember also that the Fed has a deep and strong bench in the form of &quot;institutional memory&quot; which effectively rules out any big changes in operating procedures. In the post-Greenspan era, the Fed is no longer a one-man show.Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-57858317712498287212010-01-23T14:46:07.070-08:002010-01-23T14:46:07.070-08:00Scott,
I know you&#39;re not a fan of Bernanke. ...Scott,<br /><br />I know you&#39;re not a fan of Bernanke. Won&#39;t the markets go into a tailspin if he&#39;s not confirmed?Billhttp://www.blogger.com/profile/06910619601367464068noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-31674520863084350072010-01-23T11:23:27.499-08:002010-01-23T11:23:27.499-08:00Bill: be an optimist. I think the developments of ...Bill: be an optimist. I think the developments of the past week are very bullish. Obama &amp; Co. are finding that their policies are way out of step with the wishes of the people. They are going to be forced to move to the center.Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-88221182032521830162010-01-23T11:21:47.972-08:002010-01-23T11:21:47.972-08:00alstry: credit expands without creating more money...alstry: credit expands without creating more money just as I explained in my post.Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-76479399665183746612010-01-23T11:03:20.593-08:002010-01-23T11:03:20.593-08:00brodero: that is an interesting observation. The t...brodero: that is an interesting observation. The two series do appear to track each other over long periods. I&#39;ll have to look into this some more....Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-71699544265145888382010-01-23T11:01:11.248-08:002010-01-23T11:01:11.248-08:00Ed: Thanks! I&#39;m no expert on CRE. I doubt it h...Ed: Thanks! I&#39;m no expert on CRE. I doubt it has bottomed. But I am pretty sure that whatever losses there will be going forward have already been priced in to CMBS. The market has effectively absorbed already all the losses that will happen. Now we are just playing clean-up, and waiting to see if the actual losses exceed the estimated losses or not.Scott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-13765679251873380582010-01-23T03:13:15.418-08:002010-01-23T03:13:15.418-08:00The S&amp;P 500 is a cheap buy ( except in freako...The S&amp;P 500 is a cheap buy ( except in freakouts like 2008) when<br />it trades 1:1 to NIPA corporate profits after tax.This number was 1038 at the end of the third quarter.Estimates have the fourth quarter between 1150 and 1200. Selloffs are a buying opportunity.broderohttp://www.blogger.com/profile/12296214283216386700noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-40411388259724751852010-01-23T02:20:29.849-08:002010-01-23T02:20:29.849-08:00@Scott,
can you see any signs of improvement in th...@Scott,<br />can you see any signs of improvement in the commercial real estate market ? Moody’s/REAL All Property Type Aggregate Index was up yesterday (+1% m/m)but sales volume is very very poor in Nov. ( $4.1bln vs. $69bln. in Feb. 2007). About 52% mortgages are &quot;under water&quot; and $1.4 trillion got refinanced until 2015. <br />So what do you think about commercial real estate market ? I enjoy reading your blog !<br />Thank youEdhttp://www.blogger.com/profile/12817570355932226057noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-13264089544289836932010-01-22T13:44:04.160-08:002010-01-22T13:44:04.160-08:00Scott,
You did a great job explaining how credit ...Scott,<br /><br />You did a great job explaining how credit credit from one to another simply shifts demand a few blogs ago.<br /><br />Could you explain how total credit in America expanded from about $25 Trillion in 2000 to over $50 Trillion in 2008 yet money supply didn&#39;t grow nearly as much.<br /><br />Where did all that credit come from without expanding money supply?<br /><br />Thanks.alstryhttp://www.blogger.com/profile/16025398896639165994noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-54956044055358917992010-01-22T12:53:07.852-08:002010-01-22T12:53:07.852-08:00It would be nice if Obama would stop his populist ...It would be nice if Obama would stop his populist reterick (sp?)....when is he and everyone in his administration going to realize that just about everyone (including Unions and everyone with a pension) are investors..his anti wall street, anti banks, etc etc hurts everyone!!! Let the markets work, allow capital and informed risk taking to occur again, quit trying to &quot;manage&quot; everything from the White House...this guy is truly going to hurt this country!Jeffhttp://www.blogger.com/profile/00939788327871137653noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-67839330421520741892010-01-22T12:19:56.029-08:002010-01-22T12:19:56.029-08:00So, should I go ahead and book the cruise for Spri...So, should I go ahead and book the cruise for Spring break even though some folks think Obama and Co. are going to send the economy over the cliff?Billhttp://www.blogger.com/profile/06910619601367464068noreply@blogger.com